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Stephen Pickering

Category: Economics

  • The Solution to Health Care

    In 1989 after the Berlin Wall came down, Boris Yeltsin, then Russia’s President, immediately handed over his countries largest industries to a handful of oligarchs. We all know what happened after that. One part of the Russian economy blossomed and was a raging bull market in the late 90s. Anybody who owned a Russian or Eastern European ETF, remembers those days fondly as their portfolios boomed, and there was the definite sense of a World changing paradigm shift underway. Simultaneously, in America the great internet, communications revolution was exploding, unleashing an unprecedented wave of legitimate wealth, creativity, and freedom to the people. No wonder, as the year 2000 approached, there was a palpable feeling in the air that the new millenium was about to usher in, not an Armageddon of religious prophesy, but a dawning of an age of Aquarius where a sense of wealth and freedom would manifest, a true Golden Age like no other. There was indeed “exuberance,” but it was not as Mr. Greenspan said, “irrational.”

    The most important point to remember why this isn’t working is that crony capitalism is not free market capitalism. It’s national socialism. It’s like what Warren Buffet said, ‘The next best thing to a monopoly is a duopoly.’ He was referring, at the time, to the national socialist organizations Fannie Mae and Freddie Mac. We know what those two organizations were and what they did: Created the national housing crisis while stuffing the pockets of power with unearned millions.

    What knocked the wheels off this apple cart bringing the “forbidden” fruit from the Garden of Eden? It was not the desire of the people, the “unwashed masses” to be rich and free or the greed of entrepreneurs, as the Establishment and its mouthpiece the corporate “mass” media would have us believe. On the one hand in Russia, the abuse of the Oligarchs, which is not a free market system (analagous to our Financial, Energy, Insurance, and Telecommunications industries in America), created a wave of crime and instability that was too powerful a force for the freed “cottage” industry system, a true free market, freed by eliminations of regulation and a 13% flat tax, to bare. The Russian Oligarch abuses and criminality is well documented, and what it did was open the door for an authoritarian style regime, led by Vladimir Putin, to fill the vacuum. In America a watered down, but no less effective, version of this took place with its epicenter being the Telecommunications Act of 1996 which caused the internet crash of 2000. On the surface it seemed as if the act was designed to protect the little guys and restrict the Oligarchs of Telecom. But this was a “false flag” destruction, creating a false vacuum of national socialism, or Oligarchy. The bill was designed, not to help small telecoms, but to put a knife in the side of free market creativity by retarding the natural flow of capital into this industry. The result is what we have today, an Oligarchical system in the Telecommunications industry, controlled by a few small players. These are false monopolies, false vacuums if you will, created and protected by Governmental regulation. This is national socialism which has nothing to do with free market capitalism.

    The same system holds sway in America’s Health, Energy, and Financial industry. Who writes the policies for these industries? The Oligarchs and their paid for representatives in the Government. Witness Dick Cheney and friends writing energy policy in the early part of this decade. But this same playbook has happened in Insurance, Financial (need I remind you of what came to fruition last year there?) and Telecommunications.

    The Health Insurance industry is an Oligarchichal, Government Regulated, Protected system that gives us higher prices and lower quality at we the people’s expense, for the benefit unearned gains of a few powerful elite class of Oligarchs.

    But the solution to this national socialism is not “socialism socialism”, whereby the quality degrades even further, and the prices do not go down but are simply transferred from bloated premiums to bloated taxes, and the power and money is pocketed in an unearned fashion by the same people, simply wearing different hats. What’s even worse about this scenario is that, since the majority of tax money is pocketed by governmental Oligarchs and their various pals and interests, the debt will crack the U.S. Government, like it did the Soviet Union, and which Medicare itself threatens to do all by itself in the next two decades.

    The solution to the Healthcare problem is simple. It’s almost too simple for people to accept. “De-regulation” has an ugly connotation. People have the subconscious sense that regulation is always beneficial to the people. And indeed a lot of it is. Real justice as regulation, the rule of law as applied to justice is a benefit, indeed a necessity to the public. But regulation in the name of protecting a false vacuum, a false monopoly, Oligarchical system such as what exists in the Health Insurance Industry today, works against the people and works against prosperity and creativity.

    All that needs to happen to bring down prices and increase quality in Healthcare is to outlaw governmental lobbying, to outlaw the Health Insurance Oligarchs from writing Healthcare Insurance regulation and policy. The effect of this so far has been eliminating free market forces from bringing efficiency to the industry. The Healthcare Reform Act could be written on one sheet of paper. One of the most important revisions would be to allow all citizens to buy health insurance in a free open market from anywhere in the country, anywhere in the world for that matter. In other words, regulate against fraud and misconduct but don’t regulate against free choice (for the benefit of a few large corporations to ride an unearned money train). If such an Act were passed a flood of capital would come flowing into this market and a rich ecosystem of diverse, energized, competition would blossom, fulfilling every niche in American society with a cornucopia of products and choices. Not only would needs be met, but opportunities would also manifest. Innovation, like it always does, would spur quality and efficient prices to the consumer and wealth and abundance to a whole new generation of entrepreneurs who would simultaneously create great paying, fulfilling jobs to the society itself.

    The premise of free market capitalism is this: Whenever wealth is created in an open, free market, in an ethical, non criminal, non false vacuum way (meaning propped up by Government protection disguised as “regulation”), the benefit to society as a whole and the individual is inversely proportional to the wealth that is generated for the capital, businesses, and individuals invested.

  • One of My Senators Just Co-Sponsored the Bill to Audit the Fed!

    I was so excited. This is the email I wrote to her:

    “Dear Senator Lincoln,Thank you for sponsoring S.604.

    Perhaps the largest problem in our and the World’s economy is an unstable unit of account, the wild swings in the value of our money. The sole charter of the Fed is to stabilize our unit of account and yet in a misguided effort, they do just the opposite: they cause the wild swings which result in inflation and deflation that reek havoc on the economy. All that has to be done is for them to target the gold price instead of targeting the interest rate. When the price of gold becomes to high, they should sell bonds to soak up the excess liquidity. When the price of gold becomes too low the can inject liquidity by printing. If they just followed this one simple rule there would be no more inflation or deflation, and the economy would have exactly the amount of liquidity that it demands. I also worry about the ever increasing amount of regulatory power they are being given. They should be reigned in and held accountable, not given more unaccountable power. If they are indeed a branch of the government, they should work for the people and be held accountable to the people and its representatives. If they are not, then the Congress should take back its Constitutional authority to coin money.

    Thank you again,

    Stephen Pickering
    Little Rock, Arkansas

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  • We Need A Gold Standard for Economic Prosperity

    gold image

    (Two email letters I sent concerning this subject)

    March 22nd, 2009

    Dear Adam Curry (@adamcurry),

    Ending inflation and deflation is very simple. All that has to happen is for the Fed to keep the dollar/gold ratio in a tight range by printing dollars when the price of gold gets too low (ie 1997, $10 barrel oil) and selling bonds when the price of gold gets too high (ie Now!) to soak up the excess liquidity. There was no inflation or deflation until 1971 when Nixon closed the London Gold Window where one could exchange 35 dollars for an ounce of gold. Oil was 3.50 per barrell. When he closed the London gold window, the dollar became a floating currency and the great inflation of the 70’s began. There was no energy crisis. There never has been. We don’t need a Gold Standard per se, where we actually store the stuff, we just need a de facto Gold Standard where the relationship between the paper currency and the metal stays steady. The Fed has the tools to do this easily. Why is it not done? Because the establishment knows how to profit from these wild swings in prices, while the common man gets screwed. If you look at a chart of oil from 1920 until now it basically doesn’t move until 1971, and then the line goes up like Mount Everest. How is this possible during a time when the car and airplane were invented? Its simply because all inflations and deflations are monetary, ie floating currencies, and when the supply and demand of money itself gets out of whack so do the prices of all the commodities. You ask about a World Reserve Currency. We have one. Its called Gold. Everything is ultimately priced in terms of it.

    Stephen Pickering (@pickering)

    Little Rock, AR, US

    Crude Oil Chart 1920 til present:

    CRUDEOIL1920Present

    March 23rd, 2009

    To: Mr. Sergei Perminov, Rye, Man, & Gor Securities, Moscow, Russian Federation

    Dear Mr. Perminov

    Your quote in the Moscow Times is absurd:

    “This is all in the realm of fantasy,” said Sergei Perminov, chief strategist at Rye, Man and Gore. “There was a situation that resembled what they are talking about. It was called the gold standard, and it ended very badly.”

    http://www.themoscowtimes.com/article/600/42/375364.htm

    The Gold Standard didn’t end badly. Nixon closing the London Gold Window in 1971 is what has ended badly. In other words, getting off the gold standard is what has ended badly. Look at this oil chart from 1920 until today. Look what it did beginning in 1971 when Nixon took the dollar off a de facto gold standard:

    Crude1971Present

    The only solution to this is having a “de facto” gold standard whereby the Fed keeps the dollar in a stable relationship with the price of gold. It can easily do this by printing currency when the price of Gold starts lower too much and vice versa selling bonds into the open market to soak up excess liquidity when the price of Gold begins to get too high. That’s the only way to end inflation and deflation that never existed before 1971. Keeping things the way they are will only keep the misery going. Look where its got us. The common man gets ruined, businesses can’t plan, and the engine of the economy has a monkey wrench thrown into it without a stable, standardized unit of account.

  • Government Causes Credit Freeze
    And the Crisis is purely a fiction. I am listening to Bernanke in the background testifying in the Senate. None of this would be happening without the Mark to Market rule. None of it. 8% of mortgages have defaulted. Mark to Market has caused 100% of them to marked down creating billions of false, paper losses, and a false lowering of assets, which brings in the regulators applying Capital Requirement Rules, which legally keeps the banks from lending. This freeze has been and continues to be created soley by the Federal Government. Pete Townshend is right. We do live on an immanence front, and it is purely a put on. The Credit Freeze is 100% purely created by the government, and the solution can be implemented in one day. Simply eliminate "Mark to Market" and return the billions in false paper losses to the banks, so that their Capital structure is sound, their stock prices go back up, and they lend again. I just heard Bernanke say "There is no 'magic bullet'" Yes there is. There actually is no "Crisis" but since we are playing make believe, the Magic Bullet is simply to illeminate "Mark to Market" and it all magically goes away. But it is more advantageous to the Establishment to have a Crisis, because they know how to use it to their advantage. It just occurred to me that this is an exact mirror of the false crisis of the immanence of Iraq's danger to the U.S. used as an excuse to spend a trillion, actually to line pockets with a trillion. This is a false domestic crisis used as an excuse to spend a trillion, actually to line the pockets of legalized thievery with a trillion. Only its in the name of a "Domestic Crisis" instead of a Foreign Affairs "Crisis" I posted this on the GilderTech Forum. Here were some responses: (more…)

  • The Financial Crisis of 2008 was a Hoax

    Update: 3/30/13 – Wow, this article was written a long time ago, but political and economic shifts tend to play out over decades, so from that perspective, it’s not that old. Anyway, this story came across my Facebook newsfeed today. And I thought it was relevant, to this, one of my first blog posts, New Study Confirms Economy was Destroyed by Democratic Policies by Examiner.com.hoax-1

    If Congress had not required through law that Freddie Mac and Fannie Mae securitize loans to people who did not qualify**, the sub prime crisis, “ground-zero” of the whole thing, would have never begun. But even so, Sub Prime was only 1% of the mortgage market. It was not big enough to cause an entire Financial meltdown. What caused this brush fire to spread into a full blown conflagration of epic proportions was a simple but profoundly stupid regulation written in 1992 called the “Mark to Market” rule. Simply put, over the last 6 months banks and other financial institutions have had to write down enormous amounts of assets to below par, even when those assets are being held to maturity, and still performing. What determines the “market price”? Buyers of course. But since the loans, the assets have been packaged with other financial instruments, including the common and preferred shares of the intitutions themselves, they become mixed together under a dark cloud of “will the Fed, Treasury, or FDIC declare them insolvent and wipe out their shareholder equity overnite?” What buyer will step into that market? And so since there is no “buyer” for the securities, the “market price” of the assets becomes determined to be pennies on the dollar. Enter “Mark to Market,” a standard that has no basis in FASB or GAAP accounting. In GAAP accounting a profit or loss on an asset is only taken when a transaction takes place. No transactions have taken place because the market is frozen with fear. Even if there was a “fair” market value placed on these assets, the banks would not necessarily be willing to sell them. It’s their business to hold them to maturity and to make interest as an income. That’s how banks make money.

    So it merely becomes a vicious cycle: Regulatory agencies force financial institutions to mark down assets that can’t be sold because of the fear driven into the potential buyer by the cloud of the Regulatory agencies themselves.

    There is no financial crisis. There was no lack of regulation. What we have is a regulatory crisis. The source of this problem which is ruining and has the potential to ruin the lives of millions, is the government itself.

    Why was was this financial crisis a hoax? Because the establishment knows how to take advantage of the wild swings. You know the old say, “Buy when there’s blood in the streets”? Creating “blood in the streets” is an opportunity for them, at the expense of the people. What can we do about it? Become educated, let our voices be heard, register to vote, and support representatives who represent the people and not “special interests” who are the agents of the Establishment.

    (*Update 2-22-09) – I’ve noticed today that many analysts are confirming part of my theory. Santelli, Mike Holland, David Malpass, among others have said repeatedly today that private investors who were for a while buying these ‘toxic’ assets at 27-30 cents on the dollar, pulled back when the shadow of the Government stepped in.

     

     

    **The Community Reinvestment Act

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